Introduction to the Great Depression
The Roaring Twenties era of prosperity and jazz ended with a dramatic fall, as the US economy peaked in 1928 and started to decline, with a minor stock market crash in the spring. Despite initial recovery, the market reached its peak by fall and began to plummet, with mass numbers of Americans having invested in the stock market, leading to a frantic sell-off, culminating in Black Thursday on October 24th, where the market crashed by 11%.
Causes and Consequences of the Great Depression
Economists and historians attribute the crisis to the Federal Reserve’s actions before the crash, including cutting required reserves and permitting massive monetary expansion, which led to inflation and the eventual market crash. The FED’s subsequent reaction of cutting the money supply doomed banks across the country, exacerbating the crisis. Hundreds of American banks collapsed, unable to pay out, as the US government, under President Herbert Hoover, initially hesitated to react due to a belief in minimal government intervention.
- Congress passed the Smoot-Hawley Tariff Act, imposing duties on over 800 foreign products, which ultimately accelerated the depression.
- Dozens of countries retaliated with their own tariffs, slashing US imports and exports, worsening the economic situation, and eventually prompting President Hoover to take action.
Presidential Responses to the Great Depression
President Hoover made decisions to improve the economy, including increasing taxes and federal spending, and creating the Reconstruction Finance Corporation to provide loans to struggling banks. However, these efforts had little impact on the 15 million unemployed Americans and the growing number of closed banks, leading to widespread hunger, homelessness, and anger towards the government. As a result, Franklin Delano Roosevelt was elected in 1933 in a landslide, tasked with solving America’s economic problems.
Franklin Roosevelt, dubbed FDR, campaigned on promises to aid the impoverished American people and find a solution to the Great Depression. His inaugural address featured a famous quote, “the only thing we have to fear is fear itself,” which reflected his calm and in-control attitude that served a purpose during a time of panic.
FDR’s New Deal and Economic Recovery
FDR’s administration implemented drastic measures to address the nation’s problems, increasing government interference, and passing numerous laws and programs, including the Federal Emergency Relief Act and the National Recovery Act, to boost the economy, support the poor, and regulate the stock market, with the goal of solving the country’s issues. FDR’s second wave of New Deal plans included acts like the Wagner Labor Relations Act and Social Security Act, aiming to boost the economy and protect workers.
However, the Supreme Court often opposed these measures, leading FDR to attempt to pack the Court, which ultimately failed and turned the public against him. Despite this, many economic historians question whether FDR’s policies would have ended the Depression, with some arguing he made similar changes to Hoover, just on a larger scale.
Global Events and the End of the Great Depression
World War II is widely agreed to have provided the final boost to end the Depression, with GDP growth and lowered unemployment by 1942, although unemployment metrics are complicated by the large number of Americans fighting in the war. Private sector production dropped by 50% and taxes increased during a significant economic decline in the US. The economy only began to recover after World War II, but the exact cause of the crisis and its resolution remain unclear, with multiple factors such as the stock market crash, tariffs, and the gold standard potentially contributing to the downturn.
Key Vocabulary
| Term | Pronunciation | Definition | Example Usage |
|---|---|---|---|
| Prosperity | /prɒˈsperɪti/ | A state of being successful and having a lot of money or material possessions. | The Roaring Twenties era of prosperity and jazz ended with a dramatic fall. |
| Plummet | /ˈplʌmɪt/ | To fall or drop suddenly and quickly. | The market reached its peak by fall and began to plummet. |
| Frantic | /ˈfræntɪk/ | Feeling or showing a state of intense anxiety or excitement. | A frantic sell-off led to a significant drop in the market. |
| Culminate | /ˈkʌlmɪneɪt/ | To reach the highest or most intense point. | The market crash culminated in Black Thursday on October 24th. |
| Exacerbate | /ɛksˈæsəbeɪt/ | To make a problem or situation worse. | The FED’s reaction exacerbated the crisis, leading to widespread bank failures. |
| Retaliate | /rɪˈtæli.eɪt/ | To take revenge or get back at someone for something they have done. | Dozens of countries retaliated with their own tariffs, worsening the economic situation. |
| Impoverished | /ɪmˈpɒvərɪʃt/ | Very poor or having little money. | FDR campaigned on promises to aid the impoverished American people. |
| Inaugural | /ɪˈnɔːɡjʊrəl/ | Relating to the beginning or start of something, especially a person’s term in office. | FDR’s inaugural address featured a famous quote, “the only thing we have to fear is fear itself.” |
| Drastic | /ˈdræstɪk/ | Severe or extreme, especially in a way that is considered shocking or unacceptable. | FDR’s administration implemented drastic measures to address the nation’s problems. |
| Regulate | /ˈrɛɡjʊleɪt/ | To control or direct something according to a rule or law. | FDR’s policies aimed to regulate the stock market and protect workers. |
| Opposed | /əˈpoʊzd/ | To be against something or someone. | The Supreme Court often opposed FDR’s measures, leading to a significant conflict. |
| Pack | /pæk/ | To fill or add people to a group, often in a way that is considered unfair or biased. | FDR attempted to pack the Court, which ultimately failed and turned the public against him. |
| Metrics | /ˈmɛtrɪks/ | A system or standard of measurement. | Unemployment metrics are complicated by the large number of Americans fighting in the war. |
| Gold standard | /ˌɡoʊld ˈstændərd/ | A system in which a country’s currency is backed by gold. | The gold standard potentially contributed to the downturn of the economy. |
| Tariff | /ˈtærɪf/ | A tax on imported goods or services. | Congress passed the Smoot-Hawley Tariff Act, imposing duties on over 800 foreign products. |
| Monetary | /ˈmʌnɪtəri/ | Relating to money or currency. | The Federal Reserve’s actions led to massive monetary expansion, which contributed to the crisis. |
| Inflation | /ɪnˈfleɪʃən/ | A rise in the general level of prices of goods and services in an economy. | The massive monetary expansion led to inflation and the eventual market crash. |
| Reconstruction | /ˌrɛkənˈstrʌkʃən/ | The act of rebuilding or restoring something, especially a country or economy. | President Hoover created the Reconstruction Finance Corporation to provide loans to struggling banks. |
| Landslide | /ˈlændslaɪd/ | A victory or success that is very large or overwhelming. | Franklin Delano Roosevelt was elected in 1933 in a landslide, tasked with solving America’s economic problems. |
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Grammar Focus
Grammar Focus: The Use of the Past Perfect Tense
The past perfect tense is used to describe an action that occurred before another action in the past. It is formed using the auxiliary verb ‘had’ + the past participle of the main verb. In the context of the Great Depression, the past perfect tense can be used to describe events that led up to the crisis, such as ‘The US economy had peaked in 1928 before it started to decline.’ This tense helps to show cause and effect relationships between events and provides a clear timeline of what happened.
